Stocks Mixed Ahead of Fed Meeting

Weekly Wrap Content for the week of Sep 15:

1. Week 37 major indexes performance;

2. Week 37 US sector indexes performance;

3. Major indexes weekly charts of support and resistance levels;

U.S.

For the week of 15 Sep, U.S three major indexes closed mixed, as DJI closed marginally higher while Nasdaq and SPX indexes closed lower for a second -straight week- as investors readied for the FOMC meeting next week 19^th -20^th Sep.

Key takeaways:

·      U.S. benchmark West Texas Intermediate(WTI) oil prices rose above $90 per barrel for the first time since November 2022.

·      Mixed reviews of new Apple products iPhone 15 weigh on Tech.

·      The Federal Open Market Committee (FOMC), is widely expected to conclude its policy meeting Wednesday by its leaving benchmark rate unchanged.

Refer to major indexes’ weekly performance table below.

Key highlights for the week and outlook:

1.    Pace of disinflation slows as headline and core CPI move in mixed directions. Headline CPI for August moved higher, but core CPI fell further. The headline CPI rose 0.6% for the month of August, and was up 3.7% from a year ago, an acceleration from July's 3.2% pace. On the other hand, core CPI, which excludes food and energy, moved lower, from 4.7% to 4.3%, but the 0.3% monthly rise was slightly more than expected. 

2.    Rising oil prices. After averaging $75 for most of the year, WTI crude oil prices reached a 10-month high this week of about $90 a barrel, but they are still well below last year's $123 peak. The main driver behind the recent surge has been production cuts from Saudi Arabia (the top oil exporter) and Russia, as both countries announced earlier this month that they will maintain the current lowered production through the end of the year. Sluggish growth in China, which is the biggest oil consumer, and a slowdown in European activity could prevent a more significant rise past the $100 mark. 

3.    Fed officials have indicated that they want to slow down the pace of rate hikes. This is why they will likely look through the higher energy costs for now and keep rates steady at coming week's meeting. Bond markets are pricing in little chance of a Fed rate hike next week, and about a 30% chance of one last hike in November, followed by one percentage point of rate cuts by the end of 2024. Rates are likely near their peak for this cycle.

SPX sectors in play

Seven out of the 11 sectors of the SPX index closed higher for the week. Value stocks leading the market as WTI oil prices rose above $90 per barrel for the first time since November 2022. Large-cap shares outperformed small-caps. Consumer Discretionary(XLY) and Financials(XLF) sectors outperformed. Tech(XLK) lagged. Refer to below SPX sectors ETF weekly performance table.

Indexes technical levels

All three major indexes’ weekly uptrend still intact. DJI support level around 34300 level, SPX support level around 4366 level, Nasdaq support around 13400 level. Click below three indexes for their weekly charts respectively in a new window.

DJI weekly chart

SPX weekly chart

Nasdaq weekly chart

China/HK

China stocks were mixed after official indicators revealed that the country’s economy may have bottomed, although data also pointed to ongoing weakness in the property market. The Shanghai Stock Exchange Index(SSE) ended the week broadly flat(+0.03%) while the blue chip CSI 300 gave up 0.83%. In Hong Kong, the benchmark Hang Seng Index(.HSI) shed 0.11%. (Refer to the above weekly performance table). 

Key highlights for the week and outlook for China/HK:

1.    Official data for August provided evidence of economic stabilization in the country. Industrial production and retail sales grew more than forecast last month from a year earlier, while unemployment unexpectedly fell from July. 

2.    Inflation data revealed that consumer prices returned to growth after slipping into contraction in July. The consumer price index rose 0.1% in August from a year earlier, up from July’s 0.3% decline. 

3.    The People’s Bank of China (PBOC) cut its reserve ratio requirement(RRR) by 25 basis points for most banks for the second time this year to inject more liquidity into the financial system.

Technically, SSE Index closed flattish below all its major MAs sentiment still weak but appears in sideway consolidation. Hang Seng index rose by the most in about two weeks on Friday after China’s central bank cut bank’s RRR, but it still closed marginally lower for second week in a row. Click below title to view weekly charts.

SSE weekly chart

.HSI weekly chart

Singapore

STI index rallied 2.27% for the week, led by the trio banks. DBS, OCBC and UOB gained 3.04%, 3.78% and 3.25% respectively for the whole week. STI's YTD returns positive now. 

Technically, STI index resumed its rebound after a pause previous week, upside major resistance level at around 3370 its recent high area. The index currently trading above all its major averages which is a bullish sign.

STI weekly chart

Source: Some contents and data excerpted from various public market reports.